The Geek’s Reading List – Week of November 18th 2016
Welcome to the Geek’s Reading List. These articles and the commentary are not intended to be taken as investment advice, nor should they today. That being said, investors need to understand crucial trends and developments in the industries in which they invest. Therefore, I believe these comments may actually help investors with a longer time horizon. Not to mention they might come in handy for consumers, CEOs, IT managers … or just about anybody, come to think of it. Technology isn’t just a niche area of interest to geeks these days: it impacts almost every part of our economy. I guess, in a way, we are all geeks now.
Please feel free to pass this newsletter on. Of course, if you find any articles you think should be included please send them on to me. Or feel free to email me to discuss any of these topics in more depth: the sentence or two I write before each topic is usually only a fraction of my highly opinionated views on the subject!
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1) Apple, a Trendsetter No More
To be fair, there are only so many opportunities to come out with a revolutionary product. Few companies do it once and fewer still have two or three successive hits as did Apple. It is quite clear that a company whose slogan was “it just works” comes out with a flagship phone which can’t connect to its flagship laptop without an adapter (which is not included with either product) has lost its way. Of course, loyal Apple fans will continue to overpay for dated technology, there problem will be attracting new users to a dysfunctional ecosystem.
“The first major product debut under Cook, the Apple Watch, hasn’t yet become an obvious hit. (To be fair, no other companies have found major success with wearable computers.) More ominously for Apple, it’s no longer the technology trendsetter. Yes, Apple has brought us better smartphone cameras and fingerprint sensors, but there are more areas where it has whiffed. Cook has been saying for five years that the TV industry is broken and needs an overhaul. He was right. Now the way people watch television is being upended by Netflix Inc., by “cord cutting” and by video on smartphones. Apple is barely a participant in that transformation.”
2) CRISPR gene-editing tested in a person for the first time
CRISPR is a gene editing technique which will probably be considered the greatest medical advance since antibiotics. By allowing selective deletion or modification of genes the function of those cells can be permanently corrected. In this case, the researchers hope to modify immune cells which have a gene which makes them susceptible to suppression by the cancer. By removing that gene the hope is that the immune system will attack the cancer. I see no mention of whether they are using stem cells for this but they probably are not so the modified immune system cells will die off. If the treatment works there is a good chance they will try modifying stem cells so the change is permanent.
“The researchers removed immune cells from the recipient’s blood and then disabled a gene in them using CRISPR–Cas9, which combines a DNA-cutting enzyme with a molecular guide that can be programmed to tell the enzyme precisely where to cut. The disabled gene codes for the protein PD-1, which normally puts the brakes on a cell’s immune response: cancers take advantage of that function to proliferate. Lu’s team then cultured the edited cells, increasing their number, and injected them back into the patient, who has metastatic non-small-cell lung cancer. The hope is that, without PD-1, the edited cells will attack and defeat the cancer.”
3) Google will soon ban fake news sites from using its ad network
The US election results have led to the traditional finger pointing in all directions as to who is responsible for voters having made the “wrong” decision. The media has decided that “fake” news is to blame and I have heard a lot of people plead for voters to subscribe to newspapers in order to fund “real” news. Unfortunately, “real” news led to the Iraq War because most of it was essentially propaganda, proving that the line between “real” and “fake” is rather blurry. Nevertheless Google, and more recently Facebook, have made some moves to reduce the attractiveness of the fake news business model. In a “post-fact” world, it is hard to see this will make much of a difference.
“Today, Google announced that its advertising tools will soon be closed to websites that promote fake news, a policy that could cut off revenue streams for publications that peddle hoaxes on platforms like Facebook. The decision comes at a critical time for the tech industry, whose key players have come under fire for not taking neccesary steps to prevent fake news from proliferating across the web during the 2016 US election. It’s thought that, given the viral aspects of fake news, social networks and search engines were gamed by partisan bad actors intending to influence the outcome of the race.”
4) SpaceX seeks U.S. approval for internet-via-satellite network
I find it rather odd SpaceX has made this application because a year or two ago they announced they weren’t going to go ahead with the idea. Regardless, LEOSAT broadband is a daft idea no matter who proposes it: the constellations are hugely expensive and most of the satellites spend most of their time over unpopulated areas (i.e. the ocean, Arctic, Antarctic, deserts, forests, etc.). Most of the people live in cities and most city dwellers in developed countries (the people who can afford to pay for broadband) already have affordable broadband.
“The California-based company, owned and operated by technology entrepreneur Elon Musk, has proposed an orbiting digital communications array that would eventually consist of 4,425 satellites, the documents filed on Tuesday show. The project, which Musk previously said would cost at least $10 billion, was first announced in January 2015. The latest documents, which include technical details of the proposed network, did not mention cost estimates or financing plans. Financial backers of the company, whose full name is Space Exploration Technologies Corp, include Alphabet’s Google Inc and Fidelity Investments, which together have contributed $1 billion to Musk’s space launch firm.”
5) This new Samsung SSD is waaaaay faster than yours
This is more of an advertisement than anything else but there is some value to it: most SSDs are connected via the antediluvian SATA interface which has a legacy going back to the very first PC hard drives sold 30 years ago. M.2 is better in all respects and in the near future all PCs and laptops will have an M.2 interface, with SATA relegated to “backward compatibility” and available only on desktop PCs. Needless to say, it will be hard to sell a hard disk drive into a market where most PCs don’t have an interface for it.
“M.2 is a new interface that uses the PCI Express standard, one that was once reserved only for video cards, to connect to a computer’s main board. This interface allows for much higher bandwidth (currently up to 32 gigabits per second or 4,000 megabytes per second) compared to that of the existing SATA, which caps at just 6Gbps. That said, M.2 is a new upcoming interface standard that’s expected to replace SATA completely in the future. The fact Samsung doesn’t offer an SATA version of the 960 Evo is a clear indication of this trend. To use an M.2 drive, your computer needs to have an M.2 slot or, for existing desktops, you will need a PCIe adapter.”
6) Theranos Whistleblower Shook the Company—and His Family
Every now and then the main stream media does a good job and exposing Theranos is a perfect example (their work on the fraud which led to the global credit crisis was less stellar as documented in the excellent film “The Big Short”). This article shows the challenges of being an whistle blower and the sorts of pressure a company can place on somebody with valid concerns about public safety.
(If you have trouble getting to this Wall Street Journal article, Google the title and click on the search link).
“After working at Theranos Inc. for eight months, Tyler Shultz decided he had seen enough. On April 11, 2014, he emailed company founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks. … Theranos accused him of leaking trade secrets and violating an agreement to not disclose confidential information. Mr. Shultz says lawyers from the law firm founded by David Boies, one of the country’s best-known litigators and who later became a Theranos director, surprised him during a visit to his grandfather’s house. They unsuccessfully pressured the younger Mr. Shultz to say he had talked to the reporter and to reveal who the Journal’s other sources might be. He says he also was followed by private investigators hired by Theranos.”
7) IBM’s Watson: A Disaster In The Making
I don’t usually post investment research reports but this particular one pretty aligns exactly with my thinking. IBM management learned long ago that financial engineering trumps actual engineering, which is why they have missed every important new tech market over the past 30 years. Unfortunately, financial engineering only takes you so far far and IBM has entered a period of secular decline. Ask former employees of Digital Equipment Corporation (DEC) where that leads. I find it baffling people invest in shares of the company.
“IBM describes its efforts in its 10-K as « Investing to bring Watson’s capabilities to the enterprise and building a partner ecosystem, effectively creating a market for cognitive computing ». This translates into paying developers for using its technology. IBM is boasting that it has over 70,000 developers using Watson’s API. This is far fetched: we understand that 40,000 of these developers come from its acquisition of AlchemyAPI, a small startup which had only a few million dollars in yearly revenues before its acquisition, and little to do with Watson’s technology. Before Alchemy’s acquisition in March 2015, Watson had 7,000 developers using its API. And there’s absolutely no rationale for the 40,000 developers who used AlchemyAPI’s technology, to use Watson. … To make it look like Watson is generating revenue, IBM is buying up other companies, and consolidating their existing users and revenues into its Watson Group business segment. Recently, it has acquired the medical imagery company Merge Healthcare (for $1 billion, with revenues of $212 million), and the healthcare data services company Truven Health Analytics (for $2.6 billion, revenues of $500 million). Both companies have no profits to speak of.
8) Osram’s Laser Chip for Lidar Promises Super-Short Pulses in a Smaller Package
Lidar is light based radar which provides coarse imaging information and detailed range information. In other words, when combined with image recognition it can tell you what something is and exactly how far away it is. Lidar is absolutely required for real Autonomous Vehicle (AV) functionality (as contrasted with glorified cruise control touted by Tesla). The problem is, Lidar was developed for military applications and most systems are therefore staggeringly expensive. Osram is about to change that. I figure all cars will have 4 Lidars, one at each corner of the vehicle, for redundancy.
“Those twirling banks of lasers you see atop experimental robocars cost plenty, wear fast, and suck power. The auto industry yearns to solve all those problems with a purely solid-state lidar set that designers can hide behind the grill of a car. Their wish will come true next year, according to Osram Opto Semiconductors. The company says test samples will be available in 2017, and that commercial models could arrive in 2018. With mass production, the price should drop to around 40 Euros (US $43.50), says Sebastian Bauer, the product manager for Osram, in Regensburg, Germany. By comparison, Velodyne’s rooftop lidar towers cost $70,000 and up, and that company’s new, hockey-puck-size model runs around $8000.”
9) Google Translate uses machine learning for whole sentences
Deep learning (also unfortunately referred to as Artificial Intelligence) is hitting the mainstream. Companies like Google, Microsoft, and even IBM (which will snatch defeat from the jaws of victory) have some pretty advanced technology. Among the many potential applications for Deep Learning is translation, which is, in many ways, related to speech recognition. In any event, Google is charging ahead and moving many of its services over to this type of approach and that lead to improved performance.
“It’s no secret that Google is obsessed with machine learning and artificial intelligence, especially of late. If it were up to it, those technologies would permeate all its products. It already started with Google Assistant in the Google Pixel smartphone and Google Home speaker. Now it’s bringing a dash of that to Google Translate. The company has announced that it is transitioning from using statistical machine translation to a Neural Machine method to deliver more natural sounding translations that won’t embarrass you or crack you up.”
10) The All-American iPhone
Part of “making America great again” is supposed to be repatriating manufacturing jobs. Of course, most such jobs have been lost to automation (and this is more true in electronics than any other sector) but Apple stands out because it is so profitable. The idea that you can “only” increase the labor cost by 10 to 3X and keep the price more or less the same is absurd, but I take issue that labor costs are the only impact. The reality is that manufacturing requires a complete support structure and, if that isn’t already there somebody has to build it. Of course, this is all bloviating regardless: if the best you can do for an economy is slap the cover on a robot-assembled gadget you aren’t doing much.
“According to IHS, a market analyst, the components of an iPhone 6s Plus, which sells for $749, cost about $230. … Assembling those components into an iPhone costs about $4 in IHS’s estimate and about $10 in the estimation of Jason Dedrick, a professor at the School of Information Studies at Syracuse University. Dedrick thinks that doing such work in the U.S. would add $30 to $40 to the cost. That’s partly because labor costs are higher in the U.S., but mostly it’s because additional transportation and logistics expenses would arise from shipping parts, and not just the finished product, to the U.S. This means that assuming all other costs stayed the same, the final price of an iPhone 6s Plus might rise by about 5 percent.”